The Affordable Care Act of 2010 has done much more than extending healthcare coverage to millions of Americans , its market reforms have re-defined what health insurance is (and isn't) for individuals and small groups. And in the process, those reforms are driving a much larger transformation in how care is reimbursed, how the market is organized, and the roles and behaviors of insurers, employers, vendors, consumers and providers.
Important as they are, the market reforms got scant media coverage because they're complex, medical loss ratios just aren't as riveting as say, fear-and-loathing about death panels. And the reforms are only obliquely referenced as over-regulation in the ObamaScare campaign advertising, most memorably in the form of that creepy plastic Uncle Sam character lurking around patient exam rooms.
The most far-reaching of the market reforms MLR limits, minimum coverage requirements, guaranteed issue and the elimination of exclusions for pre-existing conditions have addressed the worst problems individuals and small groups had in the pre-ACA healthcare system. Health insurers can no longer refuse coverage or overcharge based on health status and plans must cover essential health needs spending at least 80% of premiums on healthcare or preventive care services (85% for small groups) on average. Thus unable to exclude the sick from coverage, health plans have had to work harder to actually manage care and mitigate against medical risk.
Insurers have responded by increasing deductibles, copayments and coinsurance, creating narrower drug formularies and designing health plan products around narrow networks of low-cost providers. The changes forced insurers to invest in technology and systems that enable sharing of medical information, identification and tracking of high-risk patients, and advancement of evidence-based medicine.
The changes have reduced insurers profit margins for individuals and small-group accounts, and have contributed to lower overall medical inflation in the last four years. Figures from the Centers for Medicare & Medicaid Services show the national health expenditure growth rate for private insurance was 5.1 percent in 2000-2007, 4.0 percent in 2007-2010 and 1.6 percent in 2010-2013.
For providers, the ACA's market changes accelerated the trend of consolidation and acquisitions of medical practices and hospitals and pushed the creation of ACOs provider-led, technology-enabled entities that manage patient care and share in the financial risk or gain. Nationwide, insurers are collaborating with provider groups to create low-cost integrated care systems in which providers have substantial incentive to keep costs down. These deals effectively offload some risk from insurers to the providers.
But the ACA evolution isn't finished. The major insurers are girding for what they believe will be a sharp decline in employer-based insurance, with employers providing a stipend with which employees can buy care either through a private or public health exchange. They believe the so-called "Cadillac Tax" on high-value plans will steer employers to this action when it takes effect in 2018.
If that happens, millions of Americans who've been long accustomed to the protections of a group insurance plan will find themselves purchasing insurance as an individual. They'll have the higher copays and coinsurance and deductibles that discourage utilization of care, and they'll have to balance the trade-offs between premiums, deductibles and networks. And they'll be more dependent on the ACA's market reforms than they've ever been.
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